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Wednesday, 3 September 2014

A new angle on Plex (perhaps)

In the CCP accounts there is a line in called Deferred Income.  In accounting terms, Deferred Income is where CCP has received cash but the sale relates to a future period.  A good example is someone who pays up front for 6 months of subscriptions - CCP will only recognise portion of the sale as each month passes.

Plex, i suspect, could fall into this camp:

  1. Someone buys plex for $15.  So the accounting entry is CCP receives $15 in cash and also has $15 Deferred Income (so far all Balance Sheet items);
  2. Then that plex is used to extend game time by 1 month so CCP then recognises the sale of $15 and cancels the $15 Deferred Income (so now CCP can recognise the $15 on the Profit & Loss account as revenue)
In the CCP accounts there used to be one line called Deferred Income but since the end of 2013 it is now split into:
  • Subscriptions
  • In-game purchases not yet consumed
  • Sale of goods not yet delivered

It is clear what "Subscriptions" is.  I am not sure what "Sale of goods not yet delivered" is - but it is a small amount so we can safely ignore it.  I greatly suspect "In-game purchases not yet consumed" are Plex that have been created but not yet used and/or Aurum that has been bought but not yet used.  I.e. Plex sitting in hangers or on the market for sale + Aurum that is sitting in peoples accounts.  Unless there is something else players can pay real money for?

Below is the relevant part of the CCP accounts:

Deferred Income 2012 2013 2014 H1
Subscriptions 3,964,814 4,359,823 4,297,855
In-game purchases not yet consumed 1,067,512 2,108,158 2,302,098
Sale of goods not yet delivered 198,376 137,791 52,214
5,230,702 6,605,772 6,652,167

If we focus on the line "In-game purchases not yet consumed".  At December 2012 it was $1.1m, at December 2013 it was $2.1m and at June 2014 it was $2.3m.

Now, if i make the rash assumption that Aurum is spent immediately it is acquired then the value of Plex in the game doubled during 2013 but has only increased by 10% in the six months to June 2014.  If i then make the assumption that the price of Plex is $15 (i know, there were discounts etc) then at December 2012 there was 71,000 Plex in the game, in December 2013 there was 141,000 Plex in the game and as at June 2014 there was 153,000 Plex in the game.

In some ways this does not add much to the debate on the price of Plex though it does suggest only a net 13,000 additional Plex were created in the last six months (= Gross creations of Plex less Gross usage of Plex).

That may mean holders of Plex have slowed down their buying (i.e. not so much of an increase of Plex sitting in hangers or on the market) or the creators of Plex have slowed down their creation (i.e. less people creating Plex by paying the $15).

Given the price of Plex has been rising i suspect it is the supply of Plex that has slowed.  I suspect that people buy the Plex to create the ISK and as the price of Plex gives more ISK then less Plex need be bought.

Unfortunately for us, there is not much narrative with the CCP accounts and so I can only make assumptions at this stage.  In the Prospectus issued in June 2013 there was much more detail.

8 comments:

  1. Interesting aspect to pull out. On the "not consumed side", there are a lot of possible inputs there - game balance for farming activities could really swing that I suppose. What does the trend on deferred revenue look back prior to 2013?

    I'd expect that Subscriptions is the more traditional deferred revenue, btw - i.e. when I buy 12 months all at once but CCP only can recognize it month by month as I receive the service. In that sense, it is interesting to compare the two lines. If players were stopping with cash payments and moving to turning liquid assets into playing time (which we might see as a sign of dissatisfaction) then we'd see the ratio of Subscription / NotConsumed to swing, for instance.

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    Replies
    1. Nice idea.

      The CCP accounts dont split out the Subscriptions part of Deferred Income until 2012 - but we can make some basic assumptions given i suspect Plex was not a big deal prior to then.

      Using those and going back to 2009, Subscriptions in Deferred Income as percentage of Eve Online revenues has moved in the range of 5.8% to 6.1% - though it spiked in June 2013 to 7.8%. The current level is 6.3% - so no sign of much there.

      Using Subscriptions in Deferred Income as a percentage of revenues for the next 12 months shows a range of 5.3% to 5.7% though again spiked to 7.5% in June 2013.

      Hence, not much sign of players stepping back from paying for subscriptions. I don't see Plex been used instead of buying 6 or 12 months of play time.

      Perhaps suggests that players who used to pay for a month at a time now use Plex instead or Plex is used to bring on new alts.

      Delete
    2. Yes it's this. Regular subscriptions over one month. You recognize revenue when earned. When they sell PLEX they've earned it. Debit cash, credit sales revenue.

      Delete
    3. i finally did what i should have done right at the beginning and read the notes in the CCP accounts on how they account for revenues. It appears CCP only accounts for the sale of "in game currency" as revenues when it is utilised. I.e. Plex sitting in a hanger or on the market is not classed as revenues - it needs to be spent as game time or used on other services (like multi training).

      So, when CCP sells Plex it is Debit Cash, Credit Deferred Income. When that Plex is finally used on something it is Debit Deferred Income, Credit sales revenue.

      Delete
  2. The other interpretation is that people are buying (for $$$) and selling (for ISK) as many plex as ever, but people are buying (with ISK) and /storing/ fewer and fewer. If so, that'd be an indication that the 'bubble' may be popping.

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    Replies
    1. Yes - that is entirely possible also.

      Delete
  3. Multiple Character Training

    I can only imagine that the actual use of PLEX skyrocketed after this was introduced. I know I burned several myself on alt training in the last year.

    I also read on another blog that there appears to be a significant change in the PLEX market recently with big changes in buy order patterns, seeming to coincide with the Somer ban. Conspiracy bunkum perhaps...

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